UK financial institutions will see a large increase in the data they need to report to the regulator during 2014 and going forward. This is due to the introduction of the Capital Requirements Directive (CRDIV) and Capital Requirements Regulation (CRR). These establish the associated regulatory reporting frameworks: Common Reporting (COREP), Financial Reporting (FINREP) and Asset Encumbrance together with the role of the European Banking Authority (EBA). The CRR came into force on 1 January 2014, and applies directly in all EU member states.
The EBA published final Implementing Technical Standards (ITS) drafts in July 2013. Some of the dates moved forward due to the European commission (EC)’s delayed adoption of the ITS. The below dates apply to each framework as of 16 April 2014:
||1 January 2014
||1 July 2014
||31 December 2014
|First reference reporting date
||31 March 2014
||30 September 2014
||31 December 2014
|First returns to be submitted
||30 June 2014*
||11 November 2014
||11 February 2015
*The EBA has extended the submission date for Q1 2014 COREP returns to 30 June. From 2015 onwards, the submission date for Q1 will be 12 May.
The new reporting requirements will lead to significant challenges for UK financial institutions, now and in the coming years.
- Volumes of data to be reported: Some COREP returns will need 20 times more data than under the previous FSA returns. Under the old FSA returns, financial information was limited to two returns; under FINREP this will go up to 65 returns and up to 5,000 data points.
- Disaggregation of data: Existing reporting systems may not be able to report data at the required level of granularity. Manual solutions may be needed for the first reporting periods.
- Inter-departmental collaboration: There will be a need for efficient inter-departmental collaboration to ensure consistency between different regulatory and financial reporting and that the returns are complete and accurate.
- Processes and controls: Amending and aligning processes and controls regarding return preparation and submission will be needed to cope with the volume and frequency of the reporting.
- Extensive nature of legislative framework: Significant interpretation work is required to understand the regulatory reporting requirements for each data item.
- Resourcing: Financial institutions will need to ensure that they have sufficient resources to cope with the significant increase in regulatory reporting and training employees.
- XBRL Reporting: Tactical or strategic solutions covering IT environment, data sourcing and reporting in the eXtensible Business Reporting Language (XBRL) format.
- FINREP entities scoping: Many institutions are still unsure whether they are in scope for FINREP reporting as the EBA’s guidance leave room for interpretation.
- Transitional provisions: As the CRR moves toward final implementation, UK financial institutions will need to plan for this and the potential impact on returns and key ratios.
- Updates to reporting: By the end of October 2016, further requirements are expected regarding how, amongst other aspects, to calculate leverage ratios and whether the current calculation tool is suitable. Over the course of the coming years it is likely that the EBA will make further changes to both the COREP and FINREP templates.
- Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR): UK financial institutions will need to sufficiently consider LCR in 2015 and NSFR in 2018, to ensure they adhere to them.